Targets have also been missed in expanding water and electricity production and a third of Pentagon projects are still to be completed, according the report by the Government Accountability Office.
It also warns that ongoing violence across the country may push reconstruction goals further out of reach.
Defence Department officials were partly to blame for delays, after making "assumptions about funding and timeframes that later proved to be unfounded," the report said.
Amid continuing accusations of cronyism in the US rebuilding effort in Iraq, the report said that at times the department "did not take advantage of full and open competition during the initial stages of reconstruction".
Oil production -- which Bush administration officials once said would help meet vast costs of rebuilding Iraq -- remains below levels reached under Saddam Hussein.
Energy production languishes
Crude oil production was reported at about 2.4 million barrels a day, below the 2003 prewar level of 2.6 million bpd and the desired goal of 3.0 million barrels, the report found.
Though peak electricity generation capacity, at 4,855 megawatts a day was well above pre-war levels, it was still short of a 6,000 megawatt target.
In the water sector, new or restored treatment capacity was at about 1.44 million cubic metres a day, a long way from a US goal of 2.4 million cubic metres.
Management deficiencies were a key reason for shortfalls, but the still volatile security environment also hampered reconstruction.
"The difficult security environment and persistent attacks on US funded infrastructure among other challenges, contributed to project delays, increased costs and cancelling or reducing the scope of some reconstruction projects," the report said.
"The continuing violence may make it difficult for the United States to achieve its goals," the report warned, but added that it was not too late for the Defence Department to learn from its past difficulties.
Problems strike at a key pillar of the US counter-insurgency strategy in Iraq, which depends on reconstruction work to generate jobs to dissuade unemployed Iraqis from joining the insurgency.
As of the end of June, the United States had obligated more than $US18.9 billion ($A25.23 billion) for relief and reconstruction projects in Iraq and spent more than $US14.8 billion ($A19.75 billion).